Editor’s note: Quorum is not affiliated with any of the companies mentioned in this article and derives no benefit from these businesses for placement in this article.
If you want to achieve your financial goals, whether that’s getting out of debt, buying your dream home or something else, it’s a continual process that ideally starts at the beginning of each year with a financial plan for the coming 12 months. But don’t stop there! Midway through the year, these five questions can help keep you on track or adjust course if needed.
1. Is your budget working?
Sticking to your budget is trickier. So don’t wait another six months to determine if your existing budget is still realistic, which will be easiest to do if you’ve been tracking your budget since January. Otherwise, you’ll need to go back through your bank and credit cards statements to reconstruct transactions, a hassle you can avoid by adopting a tracking method that will work for you. It can be on paper or a spreadsheet or through a digital budgeting app like EveryDollar, Mint or Wally.
Take a look at your budget for the first six months of the year: Compare what you spent versus what you budgeted for. If you’ve had to spend more than you allocated for a fixed need, such as your mortgage or rent, it’s time to adjust how much money in your planned budget goes to that item. You’ll have to adjust elsewhere to make this work, unless you can find a way to generate more income, such as picking up an online hustle or asking for a raise.
If discretionary items or wants are throwing your budget off, try prioritizing them based on their level of importance or value and eliminating or reducing items at the bottom of the list until your budget balances out. For example, if you and your spouse need time together on a weekly basis where nobody has to cook or clean, then keep allocating money for dinner out on date night, but, in exchange, cancel streaming or subscription services that you find you aren’t using on a regular basis.
2. Are you paying down your debt as planned?
Halfway through the year is also a good time to check your excess credit card balances to see where you stand. If you haven’t made the repayment progress you wanted to, it makes sense to go back to your budget and figure out how to allocate more toward your monthly payments. You can do this by revisiting your discretionary items priority list and eliminating or reducing the ones at the bottom of the list.
Next, decide how you’re going to use that budgeted money to pay off your credit card debt. The two methods most often cited by financial experts focus on putting as much money as possible toward one card until it’s paid off, while making the monthly minimum payments on the rest. With the snowball method, you focus on the card with the smallest balance, allowing you to see more immediate progress, which can help keep you motivated. With the avalanche method, you focus on the card with the highest interest rate, which reduces how much you pay in interest over the long run.
3. Are you saving money?
While you’re at it, take a look at your savings. If you’re one of the 56% of Americans who don’t have enough savings to handle a $1,000 unplanned expense, such as an unforeseen car repair, it’s time to get serious about an emergency fund. There are several side gigs that can help you build this up if there’s no wriggle room in your budget to put more toward savings.
Did you have other savings goals for this year? Maybe, you wanted to save for a down payment for your first home or set aside more money for an early retirement. Check to see how you’re doing and make a plan to adjust if you’re not living up to your expectations.
4. Is your credit report accurate?
Errors on your credit report can make it harder to get approved for loans or to get the best interest rates. Fraudulent activity has the same effect. That’s why it’s important to take advantage of the free credit reports available through annualcreditreport.com to make sure yours is accurate. Normally, you can pull one report per year from each of the three major credit bureaus: Equifax, Experian and Transunion. During the COVID-19 pandemic, they allow free weekly checks.
5. Do you have a plan for holiday spending?
Finally, get a head start on one of the biggest budget stressors of the year: holiday spending. Pre-plan now for a financially healthy holiday season by doing things like opening a separate savings account that lets you preserve the money you’re setting aside for December gifts, gatherings and glittery decorations.
Once you’ve answered the questions above, and adjusted it need be, you’ll feel more confident about your finances for the rest of the year. Good luck!